Bitcoin and Ethereum have kicked off 2026 with promising momentum, climbing roughly 7% in the first six days of January, yet Bitwise Asset Management has highlighted three critical tests that could determine whether this rally continues throughout the year. According to Bitwise Chief Investment Officer Matt Hougan, sustained growth in digital assets depends on market stability, progress on U.S. crypto legislation, and a favorable equity market backdrop. Speculative tokens such as Dogecoin surged nearly 29% over the same period, signaling renewed risk appetite among investors and a potentially fertile environment for broader crypto adoption.
The first test, market stability, may already be in the rearview mirror. Hougan pointed to the lack of major shocks resembling the October 10, 2025, liquidation event that erased about $19 billion in crypto futures positions. For months, investors feared that large market makers or hedge funds might have been forced to unwind positions, creating persistent selling pressure. The absence of such disruptions, coupled with early 2026 gains, suggests these concerns have largely dissipated, reinforcing confidence in the market’s resilience.
Washington now represents the next pivotal test. Proposed legislation aimed at structuring the U.S. crypto market is moving through Congress, with a Senate Banking Committee markup tentatively scheduled for mid-January. While the exact timing remains uncertain, the legislation’s passage is critical, as it would cement the relatively pro-crypto regulatory stance that began in early 2025. Current debates center on decentralized finance oversight, stablecoin reward structures, and broader political disagreements. Hougan emphasized that achieving regulatory clarity through legislation is essential, as executive actions alone could be reversed by future administrations, potentially disrupting market confidence.
The final test involves the broader equity market environment. While crypto markets show a loose correlation with equities, a sharp sell-off in the S&P 500, particularly a drop of 20% or more, could weigh heavily on investor sentiment and risk assets in general. Current market indicators suggest low recession odds and strong potential for equity gains, which, if realized, would provide an additional tailwind for crypto markets.
Bitwise highlights that the overall setup for digital assets remains constructive. Institutional adoption continues to grow, stablecoin use and tokenization are expanding, and supportive regulatory frameworks from early 2025 are starting to yield benefits. If policy progress continues and global markets maintain stability, Bitcoin and Ethereum could sustain early-year momentum, while speculative tokens may continue to see elevated activity. From an expert perspective, these conditions represent a critical juncture: the next few weeks will likely shape the trajectory of crypto markets for the entire year.
As 2026 unfolds, investors and industry participants will be watching closely. Market stability, legislative clarity, and supportive equities could collectively pave the way for Bitcoin and the broader cryptocurrency ecosystem to achieve new highs, signaling a year of potential growth and renewed confidence across digital assets.
